With light trading volumes, stocks declined slightly on Friday as the U.S. economy added 224,000 non-farm jobs in June, compared with a forecast of 160,000. Indeed, this solid job growth complicates the Fed’s decision to cut rates at the end of the month. In any case, a 50bp rate cut now seems highly unlikely. Besides, the number of new jobs created in the U.S. pushed the Treasury yields a bit higher (U.S. 10-year Treasury yield at 2.04%, 3-month T-bill at 2.23%) marking the first weekly rise since the beginning of May. Similarly gold prices went down 0.96% (around $1,400/oz) as safe-haven demand faded.
Even if Wall Street slid after the Bureau of Labor Statistics release, major equity indices were still on pace for solid weekly gains: the S&P500 index eventually rose by 1.65%, hitting a new record high on Wednesday, while the Nasdaq composite index gained 1.94%. European markets followed the bullish trend (MSCI EMU up 1.56% WTD) though the new orders to factories in Germany fell 2.2% in May (hence a year-on-year decline of 8.6%)! The same held true in Asia (Shangai composite up 1.08%) even though the Caixin-Markit manufacturing purchasing managers’ index slipped to a five-month low of 49.4 in June (i.e. below the 50 mark indicating contraction).
Most S&P sectors fared well, including the most defensive areas of the market such as real estate (+2.44% WTD), consumer staples (+2.18%) and utilities (+1.61%) which had suffered the largest losses a week ago. At the back of the pack, energy was pushed down by the drop of 1.64% in crude oil prices (WTI at $57.51 a barrel) despite an agreement among oil producers to extend supply cuts. Macroeconomic data showing that the deterioration in global growth is accelerating starts to weigh on oil prices.
Lastly, high yield bonds (Bloomberg Barclays US Corporate High Yield Total Return: +0.26% WTD) and emerging debt (Barclays Emerging Markets Local NTR USD: +0.47% WTD) were not really impacted by the rise in Treasury yields.
Find the full report here : https://www.trackinsight.com/weekly-flow-report/2019-07-05/global